The Government's Fiscal Functions Of The Mode Selection With The Tax And Fee Reform

In recent years, different types of charges accounted for about 15% of GDP, while tax revenues accounted for just 10% of GDP. Too many charges have become a serious problem in China's economy, and cause a lot of concern. Many people suggest that the government should "transform some of the charges into taxes". But the cause of too many charges is complex. We cannot just cancel those extra charges or transform them into taxes. Excessive charges stem from a fundamental problem in our public finance system: the revenue of local governments cannot meet their needs, especially in the countryside. This paper begins with the relation of the government and the market; explaining government functions, the government's economic role in general, and local government's economic role, and then determines the adequate revenue forms for different government functions.There are seven chapters:The first chapter compares different theories and patterns of the relation of the government and the market. This author adopts the point of view of the administration ecology, and argues that how much the government should interfere with the market depends on the social and economic environment. According to the situation of the country at this period, China should choose the pattern that the government takes the major role while the market takes the minor role. The government should help to build up the market mechanism in some fields.The second chapter discusses government functions, that is, what the government should do to build a good relationship with the market. Government's functions must be suitable to its capacity. The Chinese government should interfere with the market actively. China's government capacity is not strong, but there are still many things government could do. The functions include: creating employment opportunities, supporting crucial industries, maintaining the environment for competition, establishing rules, protecting property rights, and improving the investment environment.The third chapter discusses the government's economic roles in general: allocation, distribution, and stabilization. As a developing country, China's main target is to develop. So the government's main economic role is allocation, such as the provision of public goods and merit goods. This cannot be separated completely from the distribution roles, however, since the average national income is low.The fourth chapter discusses the division of central and local governments' economic roles. It is considered that the local government is usually in charge of the allocation role, while the central government is in charge of the distribution and stabilization roles. But there are still possibilities for local government to take some distribution and stabilization roles under the supervision of the central government, inorder to satisfy the local citizen's preference for macroeconomic policy and the demand of regional development. In China, the central government should be in charge of the distribution, stabilization and part of allocation roles, while the local government is in charge of part of allocation role, such as the provision of local public goods.The fifth chapter discusses the local government's economic role. China's local government should take the role of allocation and part of the regional development. It is no doubt that the local government should have some fiscal power to improve the resource allocation. Different local governments can take different roles according to the local situation. The central government's supervision is definitely necessary to secure the general public's benefit.The sixth chapter deduces the demand for revenue from the government roles. Government revenue includes taxes, charges, and transfer payments. Different types of revenue suit for different government roles. Public goods are financed by general taxes. Allocation role is usually financed by beneficiary taxes and charges. Distribution and stabilization roles are financed by general taxes and transfer payment. This author di...